the issues of infrastructure, technology and skilled manpower, a tool that definitely should be considered is public-private partnership. PPPs are arrangements between government and private sector entities for providing public services and related infrastructure. PPPs are characterised by the sharing of investment, risk, responsibility and reward between the partners.
The idea is to induce the investment and enhanced capabilities of each participant to strengthen the delivery and reach of the service already being extended by the government. Even industry chambers need to join hands with the government in a joint effort to build and provide the needed support to the MSME sector.
MSMEs to become more banking friendly
A customised credit risk assessment system is required to make enterprises more competitive and creditworthy. Not only will it bridge the gap between an institutional lender and the MSME borrower, but it will also help develop the much-needed information database on the MSMEs, enabling easy future referrals and wiping out the problem of information asymmetry.
The SMEs need to do their management planning and make the processes more formal, so as to have the documentations ready for financing opportunities. Accounting policies and consistency in book information will lead to better reliability from the bankers. Institutionally, provisions need to be included in the rules governing the MSME sector so that periodically the enterprises are evaluated on a five-year basis and re-certified so that they can graduate from MSME to mid-size companies.
Given the importance of the sector, the government, industry chambers, think-tanks and policy-makers need to come together to create an environment conducive for MSMEs to flourish. This would in turn make MSMEs banking-friendly. Adequate RBI and Sebi support and institutional reforms are also necessary to take the sector to the next level of global competitiveness.
The author is founder, MD & CEO, YES Bank